Alpha Industries is considering a project with an initial cost of $8.4 million. The project will profuce cash inflows of $1.64 million per year for 8 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.73 percent and a cost of equity of 11.35 percent. The debt - equity ratio is .64 and the tax rate is 39 percent. What is the net present value of the project?
Alpha Industries is considering a project with an initial cost of $8.4 million. The project will profuce cash inflows of $1.64 million per year for 8 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.73 percent and a cost of equity of 11.35 percent. The debt - equity ratio is .64 and the tax rate is 39 percent. What is the net present value of the project?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter14: Real Options
Section: Chapter Questions
Problem 3MC: Tropical Sweets is considering a project that will cost $70 million and will generate expected cash...
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![Alpha Industries is considering a project with an initial cost of $8.4 million. The project
will profuce cash inflows of $1.64 million per year for 8 years. The project has the same
risk as the firm. The firm has a pretax cost of debt of 5.73 percent and a cost of equity
of 11.35 percent. The debt-equity ratio is .64 and the tax rate is 39 percent. What is
the net present value of the project?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F042025c3-e77a-4128-b0ad-2bb7eb072a65%2F3a2141ba-b6c2-456e-bebd-cb8a164810ce%2Fl1hstl6_processed.png&w=3840&q=75)
Transcribed Image Text:Alpha Industries is considering a project with an initial cost of $8.4 million. The project
will profuce cash inflows of $1.64 million per year for 8 years. The project has the same
risk as the firm. The firm has a pretax cost of debt of 5.73 percent and a cost of equity
of 11.35 percent. The debt-equity ratio is .64 and the tax rate is 39 percent. What is
the net present value of the project?
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